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India, China hog limelight at WEF
Davos (Switzerland), January 29
As the curtains came down on the annual meeting of the World Economic Forum (WEF) today, the spotlight remained firmly fixed on India and China, with global business leaders expressing interest in tapping the booming economies of the two Asian giants.

Infosys CEO on WEF Board
Nandan Nilekani Davos (Switzerland),  January 29
Infosys Technologies CEO Nandan Nilekani today became one of the youngest entrepreneurs to join 20 global leaders at the prestigious World Economic Forum (WEF) foundation board. Mr Nilekani was responsible for inspiring business and public confidence through an exemplary standard of governance.

Now Sonalika promises Rs 1.5 lakh car
New Delhi, January 29
After the Tatas, it is now the Sonalika group which has jumped into the race for developing a people’s car at Rs 1.5 lakh in two years.

IndianOil group cos post lower profits
New Delhi, January 29
The third quarter results of IndianOil group companies, Bongaigaon Refinery & Petrochemicals Ltd. (BRPL), Chennai Petroleum Corporation Ltd. (CPCL) and IBP Co. Ltd, have reported a fall in profits.

Arcelor board rejects Mittal offer
Luxembourg, January 29
Arcelor said today that its board has unanimously rejected the hostile bid made by Mittal Steel.

Tax Advice

No tax on withdrawals from deposits u/s 80C
Q. I would request you to throw light on my query.
(a) I am a senior citizen and my total income inclusive of pension to interest from fixed deposits is likely to be 1,50,000 for the year ending 31.03.2006 (assessment year 2006-07).


A Sri Lankan model displays a wedding gown at a fashion show in Colombo on Sunday.
A Sri Lankan model displays a wedding gown at a fashion show in Colombo on Sunday. — AFP

EARLIER STORIES

 
  • Tax liability

  • Residential status

  • Tuition fee

  • PPF ceiling

  • EET

Market Update

Sensex may hit 10,000 mark
Sensex surged last week, backed by a rally in global markets and traders who resorted to short-covering, ahead of expiry of the January, 2006, derivative-contracts on January 25.

  • Company highlights

  • Jagran Prakashan

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India, China hog limelight at WEF

Davos (Switzerland), January 29
As the curtains came down on the annual meeting of the World Economic Forum (WEF) today, the spotlight remained firmly fixed on India and China, with global business leaders expressing interest in tapping the booming economies of the two Asian giants.

The potential growth of India and China, besides Iran's nuclear programme and Iraq were reviewed by executives and political leaders during the week.

The spotlight on the two Asian countries, especially India, at this year's WEF was a clear shift from the last two editions of the meeting. In 2004, the discussions revolved around China, India, Russia and Brazil. Last year, China had taken centre stage.

At the final session of the WEF today, former World Bank President James Wolfensohn termed as "hugely important," the global shift to India and China — the two most populous countries, whose growing economies and huge domestic markets have attracted loads of foreign investments.

"We're moving from 6 billion to 9 billion people in the next 50 years... hence the focus on India and China," he said.

India, whose economy is now growing at about 7 per cent annually, was represented at the meeting by top political leaders and several business executives, who pitched hard for investments.

Finance Minister P Chidambaram said the government was aiming for a growth of 8 to 10 per cent.

To a question about surpassing China, Chidambaram said India does not want to overtake China in population. "India and China are not in a race against each other," he added.

"We believe that the world has enough room to accommodate both India's needs and China's needs, both for capital, for markets...," he said.

The finance minister said the paths followed by New Delhi and Beijing were different — both economic and political.

India had made a strong presentation to leaders during the Forum, but the growing clout of the Chinese economy remained a key point of discussions, said Martin Sorrell, group chief executive of the British-based advertising giant WPP.

"But it's not just India and China," Sorrel said, adding that "In the context of Asia it's countries such as Pakistan, countries such as Indonesia, Vietnam, Bangladesh in the long term, that will become critically important." — PTI

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Infosys CEO on WEF Board

Davos (Switzerland),  January 29
Infosys Technologies CEO Nandan Nilekani today became one of the youngest entrepreneurs to join 20 global leaders at the prestigious World Economic Forum (WEF) foundation board. Mr Nilekani was responsible for inspiring business and public confidence through an exemplary standard of governance.

Individuals with unique leadership experience — from business, politics, academia and civil society — participate for three-years in the Board’s activities.

The Board’s role includes managing the statutes of WEF and its institutions, appointing new members, reviewing fund applications, determining and monitoring the execution of the WEF strategies and defining the roles of the Managing Board and committees.

The other members of the Board include Mr Rajat Gupta, Senior Partner, Worldwide, McKinsey & Company; Mr Michell Dell, Chairman of Dell; and Mr Peter Sutherland, Chairman of Goldman Sachs International. — PTI

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Now Sonalika promises Rs 1.5 lakh car

New Delhi, January 29
After the Tatas, it is now the Sonalika group which has jumped into the race for developing a people’s car at Rs 1.5 lakh in two years.

“It is a dream project for me and now our concentration is on the development of this small car,” Sonalika group Chairman L.D. Mittal said here.

The company, which has used technology from Britain’s MG Rover to roll out the MUV ‘Rhino’ through its subsidiary, International Cars and Motors Ltd (ICML), says it has “various options” for carrying forward the project.

“We have worked out the pricing for the proposed car at Rs 1.5 lakh and we feel it will take about two years to develop,” Mr Mittal said. The company, which is already making three-wheelers, can develop the car on the same platform.

The company has already proved its price competitiveness by bring out MUV Rhino at a price of Rs 5.4 lakh. One of the biggest reasons for this low price is the fact that ICML’s manufacturing plant is located in Himachal Pradesh, which gives it exemptions in excise duty and income tax.

Asked whether developing a car at such a low price would mean compromise on safety and emission aspects, Mr Mittal replied in the negative. “Not at all. When we come out with a car, it will meet all required safety and emission aspects and there will be no compromise on this,” he said. — PTI

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IndianOil group cos post lower profits
Tribune News Service

New Delhi, January 29
The third quarter results of IndianOil group companies, Bongaigaon Refinery & Petrochemicals Ltd. (BRPL), Chennai Petroleum Corporation Ltd. (CPCL) and IBP Co. Ltd, have reported a fall in profits.

BRPL has posted a net profit of Rs 26.15 crore for the third quarter ended December 31, 2005, as compared to a net profit of Rs. 133.62 crore for the same quarter in the previous year. The turnover of the Company, however, increased by 36 per cent to Rs. 1,765 crore during the quarter.

Chennai Petroleum Corporation ltd. (CPCL) registered a 76 per cent decrease in the net profit for Q3 at Rs 21.28 crore. The Board of Directors declared a 30% interim dividend for the current fiscal.

IBP Co. Ltd has incurred a net loss of Rs 96.33 crore for the third quarter ended December 31, 2005, as compared to a net loss of Rs 98.01 crore for the same period the previous year. 

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Arcelor board rejects Mittal offer

Luxembourg, January 29
Arcelor said today that its board has unanimously rejected the hostile bid made by Mittal Steel.

It also said it recommended Arcelor shareholders not to tender their shares to Mittal.

“The Board of Directors has resolved that it unanimously rejects Mittal Steel’s unsolicited proposal which it considers hostile,” said the company in a statement. — Reuters

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Tax Advice

by S.C. Vasudeva

No tax on withdrawals from deposits u/s 80C

Q. I would request you to throw light on my query.

(a) I am a senior citizen and my total income inclusive of pension to interest from fixed deposits is likely to be 1,50,000 for the year ending 31.03.2006 (assessment year 2006-07). Besides I am likely to have Rs 40,000 as income from agricultural land. Kindly clarify my liability to pay income tax, if any, keeping in view the fact that senior citizen are allowed a tax-free limit of Rs 1,85,000.

(b) Are deposits under Section 80C free from income tax when withdrawn subsequently after a permissible period.

— Sarwan Singh, Hoshiarpur

A. The answers to your queries are as under:

(a) The agricultural income is required to be aggregated for the purposes of finding out the average rate of tax. In your case tax would be computed as under:

(b) The deposits for saving schemes permitted under Section 80C of the Act are deductible from the total income. The withdrawal therefrom is yet not taxable as EET regime is likely to be announced in the forthcoming Budget. On the basis of the various newspaper reports, it is likely to be prospective and not retrospective.

Tax liability

Q. 1 I have two questions regarding income tax for the year 2005-06 (Financial Year).

(a) What would be my tax liability if my gross salary is around Rs 3.25 lakh with savings of above Rs 1 lakh (80C) and interest on HBA around Rs 3 lakh?

(b) What can be done to check DDO, if it continues to deduct TDS in for excess for the same?

— Ashwani Kumar, Paonta Sahib

A. The answers to your queries are as under:

(a) The interest on house building advance is deductible against income from house property. The amount of instalment paid towards the repayment of loan is covered within the amount of Rs 1 lakh, being the deduction allowable under Section 80C of the Income-Tax Act 1961 (The Act). The two deductions are to be treated separately. You have not indicated the income from house property to enable me to ascertain the net income therefrom. It is, therefore, not possible to arrive at the total income so as to compute your tax liability.

(b) The deduction of tax at source by the DDO has to be made in accordance with the circular issued by the Central Board Direct Taxes. In case a higher deduction has been made, you have no alternative but to file your Income-tax return and seek the refund from the tax department in respect of excess payment.

Residential status

Q. My son was working with a multinational firm at Gurgaon. The firm sent him on deputation to the USA. He left India in April, 2003. Now after spending two and a half years in the USA, he has come back to India for good in October, 2005. During the previous years 2003-04 and 2004-05 he visited India hardly for a fortnight in each year. Apparently his residential status for the Assessment Year 2004-05 and 2005-06 will be “Non-Resident”. Kindly let us know what will be his residential status for the Assessment Year 2006-07.

— S.R. Shabi

A. According to section 6(1) of the Act an individual is said to be resident in India in any previous year, if he -

(a) is in India in that year for a period or periods amounting in all to 182 days or more; or

(b) having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more, is in India for a period or periods amounting in all to 60 days or more in that year.

According to Section 6(6) of the Act, an individual said to be not ordinary resident in India in any previous year if he has been a non-resident in India in nine out of the 10 previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, 729 days or less.

The taxability of the income of your son would have to be decided on the basis of the status as indicated herein above. If he is considered a resident, his entire world income would be taxable. If he is considered as not a ordinary resident the income which accrues or arises to him outside India shall not be so included unless it is derived from business controlled or a profession set up in India.

Tuition fee

Q. Please clarify whether tuition fee amounting to Rs 98,000 for education of two children is exempted from income tax for F.Y. 2005-06

— S. Narayan

A. According to the provisions of Section 80C of the Act, as amended by the Finance Act 2005, in computing the total income of an assessee, being an individual there shall be deducted the amount paid or deposited in the previous year being the aggregate of the sums referred to in sub Section (2) of the said section as does not exceeds Rs 1,00,000. One of the items provided in sub-Section (2) is tuition fees (excluding any payment towards any development fees or donation or payment of similar nature) whether at the time of admission or thereafter to any university, college, school or other educational institution situated within India for the purpose of full time education of two children of an individual. Accordingly, you will be entitled to a deduction of Rs 98,000 from your total income subject however to a total admissible deduction of Rs 1,00,000 under Section 80C of the Act.

PPF ceiling

Q. Await your clarification on the following:

1. For the F.Y. 2005-06, can the maximum ceiling of Rs 1 lakh as deduction can be claimed by investing in public provident fund or like previous F.Y. Its maximum limit is Rs 70,000 and balance by investing Rs 30,000 in infrastructure bonds.

2. For the current F.Y. if the ceiling for PPF is Rs 70,000, can I claim deduction of maximum Rs 1 lakh U/s 80C by investing Rs 30,000 by opening a PPF account in the name of my son who is a minor.

— Umesh Chopra

A. The total amount which can be deposited under PPF Rules by an individual is limited to Rs 70,000. Accordingly, to claim deduction of Rs.1 lakh under Section 80C of the Act, you will have to deposit Rs 30,000 in any other saving schemes provided for in the aforesaid section.

EET

Q. Will you please elaborate referring to respected Finance Minister Budget speech where lot of emphasis was laid for shiftover from present “EEE” to “EET”, please elaborate its likely implications after the constituted committee recommends on the people having insurance policies, PPF A/c etc. on maturity.

— Umesh Chopra

A. The EET scheme is yet to be announced by the Finance Minister. It can be elaborated upon after the scheme is so announced.
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Market Update

by Lalit Batra

Sensex may hit 10,000 mark

Sensex surged last week, backed by a rally in global markets and traders who resorted to short-covering, ahead of expiry of the January, 2006, derivative-contracts on January 25. The 10,000-level is now within sight of the barometer index. The continuation of good-number from corporates, the RBI raising its GDP growth estimates for the country from 7.5 per cent, to 8 per cent positive indications by the government in terms of FDI have aided sentiments on the bourses.

Company highlights

Reliance Industries Ltd (RIL) announced its plan to raise Rs 6,000 crores for its refinery project through a public offer. A new subsidiary, Reliance Petroleum Ltd. (RPL), will implement the new refinery and petrochemical projects at Jamnagar.

The RBI unexpectedly raised short-term interest rates by a quarter percentage point in its quarterly review last Tuesday and lifted its growth forecast for this fiscal year to 7.5-8.0 per cent from 7. 0-7.5 per cent due to an increased farm output.

This week Sensex might hit the much-awaited 10,000 mark. But investors are advised not to get carried away with the movement in Sensex and should only buy stocks on the basis of fundamentals. With Sensex already trading at 18.7 times its trailing 12-month earnings and over 16 times one-year forward earnings, valuations continue to remain stretched. Investors should remember to keep booking profit at every rise.

Jagran Prakashan

Jagran Prakashan is the publisher of Dainik Jagran. It publishes 28 editions across 10 states from 25 centres with a total installed capacity of 1.28 million copies an hour.

Jagran Prakashan plans to launch its editions in Chandigarh and Shimla in the next five years and an Indore edition in April, 2006.

At the upper end of the price band of Rs 324, it is quoting at PE (Price to earning) of 67.5 times and at the lower band of Rs 270, it is available at PE of 56.2 times on fully diluted equity of Rs 50.2 crore and on the first half annualized EPS of Rs 4.8. When compared to its peers, the valuations appear to be stretched (Deccan Chronicle trades at a PE of 27 times the first-half annualised EPS). The financial track record does not justify the high asking price. Investors may refrain from investing in the initial public offer (IPO) of the company.
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